Wednesday 17 March 2021

A complete guide to the pivot point, its types, and calculation

how to invest in share market

If you are into stock markets, you may have heard of Pivot Points. But, do you know what it is? It is nothing but a price indicator and it has been seen that most floor traders take benefit of this type of trading. Pivot Point is generally used for the prediction of stock market trends. In the method of Pivot Point Trading, people use the data of the previous period's price data to predict future support. This technical analysis indicator determines whether the stock market is bullish or bearish. If the price for a particular share is above the pivot line, the market situation is considered bullish, otherwise, it is bearish.

Calculation of Pivot Point Trading

People generally use the five-point method to find the main pivot point. To calculate this value the stock market experts use five price points- 2 resistance levels, 2 support levels, and the previous day's high, low and close price. In simple words, the formula of the pivot point is one-third of the sum of the previous high, previous low, and previous close. You can calculate this pivot point following a different formula. The one-fourth of the sum of today's opening, yesterday's high, yesterday's low, and yesterday's closing also give the same value of pivot point. For this calculation, you can collect the data from Bollinger Bands

Different types of Pivot Points

Do you know that there are five types of Pivot Point trading? These are standard pivot point technique, Fibonacci Pivot Point technique, Woodie's pivot point technique, Camarilla Pivot Point technique, and Demark Pivot Point technique. Of these, the standard pivot point technique is the easiest one and the Fibonacci one is the most popular one. 

The technical analysts generally draft a price action graph for the pivot point. Once the line reaches the pivot point there can be two options only – either supported/resisted or extended breakouts. If you join a course on "how to invest in share market", you will get to know about pivot point breakout trading, pivot point bounce trading, etc. in detail. If you are wishing to do the technical analysis of your stock portfolio yourself, you will need to have a solid knowledge of pivot points. So far, there is no better way in the market to determine the support area and resistance area of the price chart than the pivot point.  So, learn these basic things about the stock market and start investing today.

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